Whirlpool could be a great “America First” stock
America’s manufacturing prowess is a hot topic these days, with many lamenting the dearth of U.S.-made industrial goods. But maybe it’s just case of not paying enough attention to several companies that do provide leadership in manufacturing -- and actually produce things. Several U.S. companies are in that vital but underappreciated group. On top of the list: Whirlpool (WHR).
It’s a company that benefits from U.S. economic growth and such as prosaic pillars as increased consumer confidence, rising consumer spending and increasing personal income. It gains from people shopping for their homes, from new household formation and from plain everyday life. And it’s totally American, a U.S. brand that’s also highly respected worldwide.
Whirlpool was last week’s Focus Stock of the Week at S&P Capital IQ and CFRA Research, which reminded investors that it grows with the U.S. and global economy – it’s a household name investors shouldn’t ignore.
As the world’s largest major appliance manufacturer, Whirlpool “is well positioned to benefit from increased housing starts, rising personal income levels, improving employment opportunities for young adults boosting household formation, increased spending on home-improvement projects, high consumer confidence levels and easy access to low-cost financing to purchase big-ticket items,” said K. Snyder, equity analyst at S&P Capital IQ.
And there’s one important “futuristic” situation where Whirlpool could dominate. That’s in “smart homes,” which give consumers centralized control of many connected devices and systems, such as lights, heating, air conditioning and appliances. That’s what the world is coming to, and Synder said Whirlpool is well placed to capitalize on this burgeoning trend with a new line of washers, dryers, refrigerators and ovens that can be controlled with a smartphone -- or Amazon’s (AMZN) Alexa voice-controlled Echo devices.
So Whirlpool, an old global brand name, could be your basic household provider in the world of smart homes, and it’s stock can easily boost your investment portfolio.
Not surprisingly, Whirlpool’s stock hasn’t caught up with the world’s technology marvels such as Facebook (FB), Apple (AAPL), Alphabet’s (GOOG) Google, Microsoft (MSFT) and, yes, Amazon. Currently trading at $171 a share, Whirlpool stock has climbed from its 52-week low of $146 in November to a 52-week high of $194 in late January as the stock market rallied after the presidential election. Snyder sees the stock leaping to $210 a share over the next 12 months.
Some analysts note that Whirlpool would be the beneficiary of the Trump administration’s “America First” policy, as 82 percent of the products Whirlpool sells in the U.S. are manufactured in the U.S. All told, it manufactures its products in 14 countries and markets them globally under a variety of brand names, including Whirlpool, Maytag, Jenn-Air, KitchenAid, Admiral and Amana.
And analysts expect the company will benefit strongly from its recent victory in a trade case against two of its largest competitors, Samsung and LG. In December 2015, Whirlpool filed an anti-dumping petition with the U.S. Department of Commerce and the U.S. International Trade Commission (ITC) claiming its two South Korean rivals were dumping washers into the U.S.
Whirlpool contended that they grabbed a bigger share of the U.S. market by selling washers for less than they cost to produce. It also accused them of shifting production to China to avoid duties imposed on washers produced by the two companies in Mexico and South Korea. In January 2017, the ITC unanimously ruled that Samsung and LG caused injury to the U.S. appliance industry by selling their China-produced washing machines in the U.S. for less than they cost to produce.
The anti-dumping decision, Snyder argued, will lead to a more rational pricing environment in North America, where Whirlpool derives 53 percent of its sales, and should give Whirlpool room to raise prices. So he projects 5.2 percent growth in 2017 and 4.8 percent in 2018. And he forecasts operating margins of between 8.6 percent and 9.1 percent in 2017, up from last year’s 7.4 percent.
Snyder projects Whirlpool will post operating earnings of $16.05 a share in 2017 and $18.49 in 2018, up from an adjusted $14.06 in 2016. And a boost to shareholder returns comes from the company’s dividend yield of 2.3 percent, which is well supported, said Snyder, by strong cash flows.
Perhaps one of the chief reasons Whirlpool would be a timely investment opportunity now is the appliance industry’s projected recovery from its decline in North America since 2006, when the housing market slumped and spiraled lower through 2011. According to IBIS World, the industry has rebounded to about $18 billion in annual revenues. The research firm sees continued modest growth as housing also rebounds.
As the appliance industry continues to gain momentum along with the upswing in U.S. economic growth, Whirlpool should be at the top of the list of stocks reflecting that advance.
